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Creating a Leader in
Food, Health and Wellness
1
FORWARD-LOOKING STATEMENTS
Important Notice Regarding Forward-Looking Statements
This communication contains certain “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as
amended by the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the pending merger between Rite
Aid Corporation (“Rite Aid”) and Albertsons Companies, Inc. (“Albertsons”) and the transactions contemplated thereby, and the parties perspectives and expectations,
are forward looking statements. Such statements include, but are not limited to, statements regarding the benefits of the proposed merger, integration plans, expected
synergies and revenue opportunities, anticipated future financial and operating performance and results, including estimates for growth, the expected management
and governance of the combined company, and the expected timing of the transactions contemplated by the merger agreement. The words “expect,” “believe,”
“estimate,” “anticipate,” “intend,” “plan” and similar expressions indicate forward-looking statements. These forward-looking statements are not guarantees of future
performance and are subject to various risks and uncertainties, assumptions (including assumptions about general economic, market, industry and operational
factors), known or unknown, which could cause the actual results to vary materially from those indicated or anticipated. Such risks and uncertainties include, but are
not limited to, risks related to the expected timing and likelihood of completion of the pending merger, including the risk that the transaction may not close due to one or
more closing conditions to the transaction not being satisfied or waived, such as the remaining Ohio Department of Insurance regulatory approval not being obtained,
on a timely basis or otherwise, or that a governmental entity prohibited, delayed or refused to grant approval for the consummation of the transaction or required
certain conditions, limitations or restrictions in connection with such approvals, or that the required approval of the merger agreement by the stockholders of Rite Aid
was not obtained; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement (including circumstances
requiring Rite Aid to pay Albertsons a termination fee pursuant to the merger agreement); the risk that there may be a material adverse change of Rite Aid or
Albertsons; risks related to disruption of management time from ongoing business operations due to the proposed transaction; the risk that any announcements
relating to the proposed transaction could have adverse effects on the market price of Rite Aid’s common stock, and the risk that the proposed transaction and its
announcement could have an adverse effect on the ability of Rite Aid to retain customers and retain and hire key personnel and maintain relationships with their
suppliers and customers and on their operating results and businesses generally; risks related to successfully integrating the businesses of the companies, which may
result in the combined company not operating as effectively and efficiently as expected; the risk that Albertsons is unable to achieve its guidance, the risk that the
combined company may be unable to achieve its guidance, its cost-cutting synergies, its incremental revenue opportunities or it may take longer or cost more than
expected to achieve those synergies and opportunities; the risk that the market may not value the combined company at a similar multiple to earnings as that applied
to the companies that Rite Aid and Albertsons believe should be comparable to the combined company, and risks associated with the financing of the proposed
transaction. A further list and description of risks and uncertainties can be found in Rite Aid’s Annual Report on Form 10-K for the fiscal year ended March 3, 2018 filed
with the Securities and Exchange Commission (“SEC”) and in the definitive proxy statement/prospectus that was filed with the SEC on June 25, 2018 in connection
with the proposed merger, and other documents that the parties may file or furnish with the SEC, which you are encouraged to read. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-
looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements relate only to the
date they were made, and Rite Aid undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made
except as required by law or applicable regulation. All information regarding Rite Aid assumes completion of Rite Aid’s previously announced transaction with
Walgreens Boots Alliance, Inc. There can be no assurance that the consummation of such transaction will be completed on a timely basis, if at all. For further
information on such transaction, see Rite Aid’s Form 8-K filed with the SEC on March 28, 2018.
Information contained in this presentation that is specific to Rite Aid or Albertsons, including financial information and guidance, was supplied solely by the company as
to which the information relates. Neither company independently verified the information supplied by the other company, and each company is solely responsible for
such information supplied.
2
ADDITIONAL DISCLOSURES
Additional Information and Where to Find It
In connection with the proposed merger involving Rite Aid and Albertsons, Rite Aid and Albertsons have prepared a registration statement on Form S-4 that included a
proxy statement/prospectus. The definitive proxy statement/prospectus was filed with the SEC on June 25, 2018. The registration statement has been declared effective
by the SEC. Rite Aid has mailed the definitive proxy statement/prospectus and a proxy card to each stockholder entitled to vote at the special meeting relating to the
proposed merger. Rite Aid and Albertsons also plan to file other relevant documents with the SEC regarding the proposed merger. INVESTORS ARE URGED TO READ
THE DEFINITIVE PROXY STATEMENT/PROSPECTUS, AS WELL AS OTHER DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. RITE AID’S EXISTING PUBLIC FILINGS WITH THE SEC SHOULD ALSO BE READ, INCLUDING THE RISK FACTORS CONTAINED THEREIN.
Investors and security holders may obtain copies of the Form S-4, including the proxy statement/prospectus, as well as other filings containing information about Rite Aid,
free of charge, from the SEC’s website (www.sec.gov). Investors and security holders may also obtain Rite Aid’s SEC filings in connection with the transaction, free of
charge, from Rite Aid’s website (www.RiteAid.com) under the link “Investor Relations” and then under the tab “SEC Filings,” or by directing a request to Rite Aid, Byron
Purcell, Attention: Senior Director, Treasury Services & Investor Relations. Copies of documents filed with the SEC by Albertsons will be made available, free of charge,
on the SEC’s website (www.sec.gov) and on Albertsons’ website at www.albertsonscompanies.com.
Non-Solicitation
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Non-GAAP measures
This communication includes certain non-GAAP measures, including EBITDA (Earnings before interest, tax, depreciation, and amortization), Adjusted EBITDA and net
debt (collectively, the "Non-GAAP Measures"). These Non-GAAP Measures are performance measures that provide supplemental information that Albertsons and Rite Aid
believe are useful to analysts and investors to evaluate ongoing results of operations, when considered alongside other GAAP measures such as net income, operating
income and gross profit. These Non-GAAP Measures exclude the financial impact of items management does not consider in assessing the ongoing operating
performance of Albertsons, Rite Aid or the combined company, and thereby facilitate review of its operating performance on a period-to-period basis. Other companies
may have different capital structures or different lease terms, and comparability to the results of operations of Albertsons, Rite Aid or the combined company may be
impacted by the effects of acquisition accounting on its depreciation and amortization. As a result of the effects of these factors and factors specific to other companies,
Albertsons and Rite Aid believe these Non-GAAP measures provide helpful information to analysts and investors to facilitate a comparison of their operating performance
to that of other companies. A reconciliation of the Non-GAAP Measures to the most directly comparable GAAP financial measures are included at the end of this
communication. Additional information regarding these Non-GAAP measures are available in previously disclosed SEC filings of Albertsons, Albertsons Companies, LLC
and Rite Aid. The appearance of Non-GAAP Measures in this communication should not be construed as an inference that its future results will be unaffected by unusual
or non-recurring items. Except as otherwise noted herein, a reconciliation of Non-GAAP Measures has not been provided because such reconciliation could not be
produced without unreasonable effort.
3
TRANSACTION OVERVIEW
4
MERGER IS THE RIGHT COMBINATION AT THE RIGHT TIME
Accelerates Rite Aid’s transformation and improves its ability to compete in a
consolidating and evolving marketplace
Enhanced − Increased scale and density, with an expected $83 billion in sales, improved
Competitive Position Adjusted EBITDA of $3.7 billion(1), diversified profits, reduced leverage and
enhanced strategic position in key markets
− Creates omni-channel ecosystem through integrated pharmacy, grocery and
PBM channels, enhancing ability to serve customers where, when and how
they want to shop
Robust discussions with multiple third parties over an extended time period
around a range of strategic options for Rite Aid and considered Rite Aid’s
Thorough Review of strategic position as a standalone company
Strategic Options Process included significant Board oversight and involvement
Negotiating committee excluded Rite Aid Chairman and CEO
No superior alternatives resulted from these efforts
Rite Aid shareholders to own 28.0% - 29.6% stake in a larger combined company(2)
Rite Aid shareholders’ stake in the combined company exceeds Rite Aid’s relative
Significant Upside for contribution, providing potential to deliver greater long-term value
Rite Aid Shareholders
Significant additional value from $375 million in expected annual cost synergies
and $3.6 billion incremental annual revenue opportunities expected to be realized
by the end of February 2022(3)
(1) Includes expected full run-rate cost synergies of $375mm that Rite Aid and Albertsons believe can be realized by the end of February 2022, with an associated one-time cost of $400mm. Note this
does not include revenue opportunities.
(2) 29.6% if all shareholders elect stock or 28.0% plus approximately $200 million in cash if all shareholders elect combination of cash and stock.
(3) Associated one-time costs to achieve of $400 million for cost synergies and $300 million for revenue opportunities. 5
MOST ATTRACTIVE OPTION IN THE RANGE OF ALTERNATIVES CONSIDERED
Rapidly evolving retail healthcare environment underscores need to accelerate Rite Aid’s
transformation
Standalone Company − Continued evolution in the marketplace with increased competition, drug reimbursement
Strategy rate pressure and market consolidation
− Risk of payor concentration and significant reliance on pharmacy
− Capital constraints imposed by Rite Aid’s leveraged balance sheet, even after store sale to
Walgreens Boots Alliance (WBA)
Merger with WBA terminated after no clearance by FTC; completed alternative store sale
to WBA in March 2018
Potential Business Explored combinations with an extensive list of potential partners
Combinations No other credible bidder with a more compelling alternative emerged during either the
WBA or Albertsons processes
No proposals received from any party in the five months following merger
announcement; break-up fee of $65 million not a significant impediment for interested
third parties
Considered unsolicited offers for EnvisionRxOptions, which were deemed to not be in
the best interest of the company or shareholders
Strategy for − EnvisionRxOptions is a critical asset in advancing strategy to deliver cost effective
EnvisionRxOptions solutions to payors and providers
− Sale would undercut diversification efforts
− Would leave company with reduced growth opportunities and more exposed to retail
pharmacy
Engage with patients in Expand clinics and other value added services in
low cost settings Albertsons stores
Leverage scale through markets through addition of 1,777 Albertsons
horizontal acquisitions pharmacies, attract narrow networks and
reduce operating costs
7
MERGER ACCELERATES RITE AID’S STRATEGIC AND FINANCIAL
TRANSFORMATION
1 2 3
Increased …Solidifies
…New Levers
Geographic Financial
for Growth…
Presence… Strength
Convenience and Leverage strength and Strong cash flow for
format choice for capabilities of both future investment …to the leader in
The #3 drug store customers companies Food, Health &
player with ~2,530 Diversifies revenue Wellness with
counters(1)… Leading position New customer lives and profit streams 4,310 counters
in key markets
Transforms front end Substantial synergy
opportunity
Access new markets
0%
-20%
3/8/18: Cigna
-40% announces 6/28/18:
acquisition of Amazon announces
Express Scripts acquisition of PillPack
-60%
-100%
10/26/15 2/26/16 6/26/16 10/26/16 2/26/17 6/26/17 10/26/17 2/26/18 6/26/18
(1)
$0.6 $2.3
(@ Pre-Ann. Stock Price of $2.13)
(2) Ownership
2.7 7.3 (Assuming all stock election)
(@ 0.5x.Discount to Kroger Multiple)
$3.3 $9.6
12
CREATING A LEADER IN FOOD, HEALTH AND WELLNESS
Integrated PBM
Platform
40+ million 336,000 Over 4 million lives under
Customers per week Associates management
#1 or #2 $83bn $3.3bn
Share in ~66% of MSAs Revenue(1) Adj. EBITDA(1)
Note: Financial figures add together LTM statistics for Rite Aid and Albertsons Companies per respective latest Q4, other than share in MSA which is an Albertsons figure, and lives under management (Includes Envision Rx
Options).
(1) On June 27, 2018, Rite Aid provided Adjusted EBITDA and net income guidance for its FY ending February 2019. For further information about this guidance, including a reconciliation of the Adjusted EBITDA range to
the net income (loss) range, see the Appendix to this presentation or Rite Aid's Form 8-K dated June 27, 2018. On July 16, 2018, Albertsons provided a financial outlook for FY ending February 2019. For further
information, including a reconciliation of Adjusted EBITDA to operating income, see the Appendix to this presentation or Albertsons’ Form 8-K dated July 16, 2018. Numbers exclude estimated synergies expected
from the transaction. 13
WITH THE ALBERTSONS MERGER, RITE AID’S FINANCIAL PROFILE IS
TRANSFORMED
Excl. / Incl.
Cost Synergies(5)
Adj. EBITDA(1) $0.6 $3.3 / $3.7 ~6x larger
% margin 3.0% 4.1% / 4.5% Higher margins
Excl. / Incl.
Cost Synergies(5)
Net Debt / Adj. EBITDA(2) 4.8x(3) 4.1x / 3.8x(4) Lower leverage
Expected <2.75x within 36 mos.
Note: Revenue and Adj. EBITDA figures presented are estimates for FY ending February 2019. Rite Aid projected EBITDA is ~$645mm (representing the mid-point of the guidance range) and Albertsons projected EBITDA is
$2,700mm.
(1) On June 27, 2018, Rite Aid provided Adjusted EBITDA and net income guidance for its FY ending February 2019. For further information about this guidance, including a reconciliation of the Adjusted EBITDA range to the net
income (loss) range, see the Appendix to this presentation or Rite Aid's Form 8-K dated June 27, 2018. On July 16, 2018, Albertsons provided a financial outlook for FY ending February 2019. For further information,
including a reconciliation of Adjusted EBITDA to operating income, see the Appendix to this presentation or Albertsons’ Form 8-K dated July 16, 2018.
(2) Rite Aid net debt of $3.0bn as of June 2, 2018 (excluding proceeds to be realized in the future from the sale of three distri bution centers to WBA); Albertsons net debt of $10.6bn as of June 16, 2018. Pro forma net debt
excludes proceeds to be realized in the future, refinancing, transaction costs and $200mm potential cash consideration from cash election.
(3) Based on LTM June 2, 2018 Adj. EBITDA of $635mm.
(4) Based on FY February 2019E EBITDA.
(5) Includes expected full run-rate cost synergies of $375mm that Rite Aid and Albertsons believe can be realized by the end of February 2022, with an associated one-time cost of $400mm. Note this does not include revenue
opportunities.
14
RITE AID’S STRATEGIC POSITION DRAMATICALLY ENHANCED
Creating a Top Five Food & Drug Retailer
Pro Forma LTM Revenue
($ billions)
$300
$186
$123
$112
$83
$72
$22
Pharmacy
Counters 4,640 9,760(2) 2,270 9,430(3) 4,310 1,700(4) ~2,530
Nationwide(1)
Combined company will have significantly improved scale and competitive position
(1) Rite Aid data as of June 2, 2018. Data for other companies based on most recent 10-K filings or Wall Street equity research estimates.
(2) Includes 1,695 pharmacies within Target stores.
(3) Includes 1,932 pharmacies acquired from Rite Aid and pro forma for announced 600 store closures.
(4) Target pharmacies are operated by CVS and are also captured in CVS store count.
15
BUILDING COMPETITIVE ADVANTAGE THROUGH COMBINATION OF
PHARMACY & GROCERY
Standalone
Pharmacies
Fresh(1)
PBM
Drive Up & Go &
Grocery Delivery
Meal Kits in-store
and online
subscription
Loyalty Program
Pharmacy Counters
Nationwide(2) 4,310 2,270 9,760(3) 9,430(4) 4,640
#1 #2
Seattle #1 Shaw’s
#1
#1 #1
#3
Portland #1 #1 #1
#2 #3
Intermountain
Acme
#1 #3 #2
Eastern
#1 #2 #1 #2
#3 #2
Nor Cal
Jewel Osco
Denver #3 #2
#2
#1
So Cal
#2 #1
Southwest United
#3
Southern
Rite Aid location Albertsons location # Total pharmacy count(2) # Grocery regional rank(3)
Note: Rite Aid information is pro forma for its store divestitures to WBA. The sale of all 1,932 stores under the asset purchase agreement with WBA was completed in March 2018; the transfer of three remaining
distribution centers and related inventory is expected to begin after September 1, 2018. For Albertsons, state of Alaska is part of Seattle operating division and state of Hawaii is part of the Nor Cal operating
division. Grocery regional rank is based on markets in which Albertsons regional chains compete.
(1) Ranked by store count.
(2) Pharmacy share (green circle) based on number of stores vs. competitors in a given state.
(3) Grocery regional ranks (blue circle) based on Nielsen Food Channel analysis data (excluding mass) for calendar Q3’17 across Albertsons’ operating divisions. 17
SOUTHERN CALIFORNIA MARKET ILLUSTRATES EXPANDING
CONVENIENCE IN OUR MOST ATTRACTIVE MARKETS
18
COMBINATION STRENGTHENS OUR PHARMACY PRESENCE IN
IMPORTANT STATES
Total
Pharmacy Counter Pharmacy Counter
State counters Share(1) Counters Share(1) Rank
19
SUBSTANTIAL ESTIMATED COST SYNERGIES
$375mm Run-Rate Cost Synergies(1)
($ millions)
Supply Chain &
Manufacturing
Branded
Corporate & Product COGS
Regional Savings
Functions
$25
$40 $90
Marketing &
Advertising,
Insurance, $55
Utilities, Other
$90
$75
Own Brand
Pharmacy Purchasing Penetration &
& Operational COGS Savings
Efficiencies
Rite Aid and Albertsons have proven track records of cost reduction,
integration success and synergy realization
(1) Run-rate cost synergies expected to be realized by the end of February 2022, with associated one-time cost of $400mm.
20
ADDITIONAL OPPORTUNITIES TO DRIVE TRAFFIC AND GROWTH
Broader Health
Broaden health and wellness value proposition to create an omni-
Value
Proposition channel retail experience
Pharmacy
Enhanced
Leverage Front End capabilities and pharmacy expertise to Customer Grocery
Customer Customer
Experience enhance customer offering
Digital & Creating long term solutions to meet customers where, when and
eCommerce how they want to shop
(1) Expected to be realized by the end of February 2022, with associated one-time costs of $300 million.
(2) Excludes Jewel Osco.
21
FOCUSING ON RELATIONSHIPS WITH OUR MOST VALUABLE
CUSTOMERS
National Pharmacy Brand With More Options Albertsons Rx Customers Spend Significantly
And Convenience For Customers More Than Non-Rx Customers(1)
Spend per transaction
4,310 Pharmacies ~$92
>3.5x
$15bn Annual Combined
Higher total
spend per ~$26
week
Pharmacy Sales(2)
~$66
~325 Health Clinics >2.5x
Higher grocery
spend per
~$24 week
Our nationally recognized pharmacy brand will appeal to preferred networks and drive valuable
incremental pharmacy customers
(1) Based on Albertsons customer data for FY’17 Q3.
(2) Does not include Front End or EnvisionRx sales.
22
RITE AID SHAREHOLDERS BENEFIT FROM ALBERTSONS’ FINANCIAL
MOMENTUM
Albertsons’ Strong Recent Trends FY 2017 – FY 2018E Adj. EBITDA Bridge(2)
($ millions)
Albertsons’ last two quarters demonstrated
strong sales and EBITDA performance
~$30 $2,700
Positive identical store sales of 0.6% in Q4- ~$100
FY17 and 0.2% in Q1-FY18(3)
~$170
Adj. EBITDA up $25mm year-over-year in
Q4-FY17 and $44mm in Q1-FY18, exceeding
Q1-FY18 internal expectations
$2,398
Own Brands sales penetration up 56 bps to
24% in Q1-FY18
“We also think that the omni- “With 4,345 pharmacies post-close, the “...this quarter's results reaffirm our belief in the
channel platform makes the combined company will be better positioned, achievability of the $3.7B in proforma adj.
business more defensible against due to greater scale and broader geographic EBITDA, which includes cost synergies, that mgmt
the potential threat of AMZN and presence, to compete for preferred pharmacy provided when it announced its acquisition by
retailers offering delivery services.” networks. Additionally, the combination of RAD Albertsons. We continue to believe that
- Cowen, May 15, 2018 and ABC provides greater leverage in rationale for the deal makes sense.”
discussions with MCK, which could result in - Cowen, June 27, 2018
“CVS and WBA will face a stronger better and/or earlier relief in its drug purchasing
competitor as opposed to a share costs.” “...we view the deal as preferable for Rite Aid
donor as they have in recent years - Cowen, May 15, 2018 shareholders relative to the company pursuing a
with RAD” stand-alone strategy.”
- Leerink, Feb 20, 2018 “We believe the increased scale should provide - J.P. Morgan, Feb 21, 2018
additional leverage in negotiations with the
supply chain…. allows the Rite Aid business to
“We think this is a good option for “We believe there is a low likelihood that others
become part of a more diversified business … step in with a competing bid.”
the remaining pro forma RAD as it
allows for a greater opportunity to reinvest
yields attractive synergies, makes - J.P. Morgan, Feb 21, 2018
cash flow into the store base. Further, we point
the combined company a stronger
to the ability to leverage a broader footprint in
regional player” key markets as it relates to narrow/preferred “We think the acquisition by ABS is the best
- Mizuho, Feb 20, 2018 network opportunities under EnvisionRx outcome for RAD shareholders, given the
integrated PBM model.” challenges it was facing as a smaller, regional
- J.P. Morgan, Feb 21, 2018 pharmacy player.”
- Cowen, May 15, 2018
25
BOARD FOLLOWED THOROUGH PROCESS
Robust Exploration of
Extensive Due Diligence
Detailed Vetting of Cost
Strategic Options with on Albertsons and Revenue Synergy
Multiple Parties Projections
WBA merger review and subsequent termination was highly public and
Public and provided other potential interested parties time to emerge, but they did not
Transparent No bona fide alternative transactions have been proposed since the
announcement of the Albertsons merger
27
SUPPORT THIS VALUE ENHANCING TRANSACTION
Accelerates Rite Aid’s transformation and improves its ability to compete in a
consolidating and evolving marketplace
Enhanced − Increased scale and density, with an expected $83 billion in sales, improved
Competitive Position Adjusted EBITDA of $3.7 billion(1), diversified profits, reduced leverage and
enhanced strategic position in key markets
− Creates omni-channel ecosystem through integrated pharmacy, grocery and
PBM channels, enhancing ability to serve customers where, when and how
they want to shop
Robust discussions with multiple third parties over an extended time period
around a range of strategic options for Rite Aid and considered Rite Aid’s
Thorough Review of strategic position as a standalone company
Strategic Options Process included significant Board oversight and involvement
Negotiating committee excluded Rite Aid Chairman and CEO
No superior alternatives resulted from these efforts
Rite Aid shareholders to own 28.0% - 29.6% stake in a larger combined company(2)
Rite Aid shareholders’ stake in the combined company exceeds Rite Aid’s relative
Significant Upside for contribution, providing potential to deliver greater long-term value
Rite Aid Shareholders
Significant additional value from $375 million in expected annual cost synergies
and $3.6 billion incremental annual revenue opportunities expected to be realized
by the end of February 2022(3)
(1) Includes expected full run-rate cost synergies of $375mm that Rite Aid and Albertsons believe can be realized by the end of February 2022, with an associated one-time cost of $400mm. Note this
does not include revenue opportunities.
(2) 29.6% if all shareholders elect stock or 28.0% plus approximately $200 million in cash if all shareholders elect combination of cash and stock.
(3) Associated one-time costs to achieve of $400 million for cost synergies and $300 million for revenue opportunities. 28
Appendix
KEY TRANSACTION TERMS
For every 10 Rite Aid shares, Rite Aid shareholders will receive either (i) 1 share of
Albertsons plus $1.832 in cash, without interest or (ii) 1.079 shares of Albertsons
Consideration If all Rite Aid shareholders elect to receive shares plus cash, former Rite Aid shareholders
will own appx. 28.0%(1)
If all Rite Aid shareholders elect to receive solely Albertsons shares, former Rite Aid
shareholders will own approx. 29.6%
(1) If all Rite Aid shareholders elect to receive shares plus cash, the pro forma fully diluted number of Albertsons shares will be 392.9 million. 30
THOUGHTFUL MERGER AGREEMENT MITIGATES SHAREHOLDER RISK
31
ROADMAP TO COMPLETION
32
ALBERTSONS Q1’18 RESULTS
Commentary Summary Financials
Total Albertsons sales during Q1’18 increased 1.0% to $18.7bn
compared to $18.5bn in Q1’17, driven by ID sales increase of 0.2% Actual Actual
and higher fuel sales
E-Commerce sales, including Instacart and Plated meal kits, 16 Weeks 16 Weeks
grew 108% year over year 16-Jun-18 17-June-17 Variance
($ in millions)
Excluding fuel, Albertsons gross margin during Q1’18 increased 60
basis points year over year, primarily attributable to:
Improved product mix as higher margin categories including Sales $18,653 $18,460 1.0%
fresh and organic continue to outgrow the rest of the store
Lower shrink expenses year over year as well as sequentially
Own Brands penetration increased 56 basis points to 24% ID Sales % 0.2% (2.1%) 2.3%
Lower advertising costs as the company reduced print and in-
store tag costs
Albertsons Adjusted EBITDA during Q1’18 increased $44m to Gross Profit $5,171 $5,059 2.2%
$816m or 4.4% of sales compared to $772m or 4.2% of sales in the
same period last year, primarily driven by:
Gross Margin % 27.7% 27.4% 30bps
Benefit from ID sales of 0.2%
Improved gross profit
Realization of cost reduction initiatives and Safeway merger Excluding Fuel 60 bps
synergies
In Q1, Albertsons continued its disciplined philosophy of managing
Capex, and spent $350M in Capex, or $313M excluding one-time Adjusted EBITDA $816 $772 $44
Safeway integration Capex
Healthy cadence of 24 major remodels and 2 new stores
Margin % 4.4% 4.2% 20 bps
Continued focus and Capex spend in technology, E-Commerce,
and automation that positions Albertsons well for long-term
success and competitiveness Capex (Excl.
$313 $382 ($69)
Strong Q1’18 performance that exceeded Albertsons’ internal Integration)
expectation on Adj. EBITDA, coupled with the remaining Safeway
synergies, cost savings initiatives, and improving ID sales provide
further confidence in achieving Albertsons’ FY’18 outlook
33
ALBERTSONS’ FY’18 OUTLOOK
FY’18 Outlook(1) FY’17 – FY’8E Adj. EBITDA Bridge(2)
($ in millions)
Albertsons expects continuation of positive ID sales momentum
and ID sales to grow to 1.5% - 2.0% in FY’18
~$30 $2,700
Albertsons expects continued improvement in its operating ~$100
results and is confident in achieving EBITDA of ~$2,700m, which
is primarily attributable to: ~$170
$170m of improvement in shrink expense (30 bps), which
had been elevated in part by system conversion activities
$100m of incremental Safeway merger synergies from DC $2,398
consolidation and elimination of TSA fees paid to
SUPERVALU as the company converts all remaining stores
in Jewel, Acme and associated distribution centers
$30m of other items include identified cost reduction
initiatives, margin improvement from increasing Own
Brands penetration and fresh mix-shift, partially offset by
union contract, minimum wage and other normal cost
increases
Albertsons expects to spend ~$1.2bn in Capex in FY’18
Continue to upgrade its store base by focusing on
remodels and resets, accelerate investment in technology,
E-Commerce, supply chain automation as well as file buys
Albertsons expect its effective tax rate to be in the range of
25% to 27%, excluding one-time discrete items
Albertsons expect its interest expense to remain relatively flat
year over year
Source: Albertsons earnings release dated July 16, 2018 and Form 10K dated May 11, 2018.
(1) Related to activities to integrate acquired businesses, primarily the Safeway acquisition.
(2) Includes expenses related to acquisition and financing activities.
(3) Primarily includes lease adjustments related to deferred rents and deferred gains on leases. Also includes amortization of unfavorable leases on acquired Safeway surplus properties, estimated losses related to the security
breach, changes in our equity method investment in Casa Ley, fair value adjustments to CVRs, foreign currency translation gains, costs related to our initial public offering and pension expense (exclusive of the charge
related to the Collington acquisition) in excess of cash contributions, gain / loss on interest rate and commodity hedges, gain / loss on debt extinguishment, and facility closure and related transition costs.
36
ALBERTSONS – RECONCILIATION OF OPERATING INCOME TO
ADJUSTED EBITDA (FY ENDING FEBRUARY 2019 GUIDANCE)